Energy companies' resilience recognised

The banking and resources sectors have borne much of the brunt of recent volatility, but investors have recognised the resilience of energy companies such as Origin and AGL, who are weathering the storm.

Transcript

PHILLIP LASKER: The banking and resources sectors have borne much of the brunt of recent volatility.

But investors who've recognised the resilience of energy companies such origin and AGL are weathering the storm. Scott Alle reports.

SCOTT ALLE: Not quite a siege mentality. This heavy example of street art was on hand but not needed at the AGM of energy giant AGL.

Retail investors left a little more reassured that their decision to stay with utilities has left them less exposed to the expected slowdown in economic activity.

MICHAEL FRASER, MD AGL ENERGY: AGL's share price in relative terms has outperformed the market over the last 12 months that certainly makes it a lot easier rather than being in a position where the share price has dropped dramatically.

SCOTT ALLE: Shares in Australia's two dominant electricity and gas retailers AGL and Origin Energy have proved among the most resilient stocks to recent market shocks.

Origin today even upgraded its forecast for this financial year, expecting a 40 per rise in underlying profit. And slight shareholder unease about the $9.5 billion deal with US oil and gas giant ConocoPhillips to develop coal seam assets was soothed by managing director Grant King.

GRANT KING, MD, ORIGIN ENERGY: We have no reason to have any concerns over Conoco's ability to fund the transaction and of course a very large and very sound company. I think it's important to, in these more challenging times, recognise that not all of the sectors of the economy are in distress.

SCOTT ALLE: Indeed Origin shares have only lost 2.5 per cent since August 29, and closed at $15.75 today compared to $9.58 a year ago.

The company has more than $2 billion tied-up in power generation development projects, and isn't considering scaling back investment.

GRANT KING: We make investment decision in assets that have economic lives of 30 years or more, in relation, for example, to this LNG project, maybe 30 to 40 years is the economic timeframe. And so cycles that play out over a year or two are basically irrelevant its fundamentally driven by the long-term view.

SCOTT ALLE: But shorter term both companies are in the enviable position of having cash to spend and the New South Wales Government's electricity retailers present a tempting target.

MICHAEL FRASER: The new Premier has said he intends to pursue the sale of the retail businesses that's an obvious area of interest.

GRANT KING: I trust the NSW Government will continue to think through whether its interests to continue those assets.

SCOTT ALLE: Certainly many of Origin's shareholders remain upbeat about the company's prospects, tied to the still anticipated contracts for LNG supplies to Asian countries.

VOX POP 1: They'll sell it to China, they'll sell it to Asia. So there's a huge market for the gas.

VOX POP 2: Gas in particular has a huge future still. I mean with the - trying to cut down on the use of coal, gas is certainly one of the substitutes.

SCOTT ALLE: And at this stage both energy players say there's no intention to shelve ambitious plans for renewable energy such as wind and solar, that will also generate revenue over coming decades.